Recently, due to an overwhelming number of complaints against commercial and online banks, people thought that it’d be better to finally switch their dealings to some other platform. We’re talking about credit unions and the so called “benefits” associated with them.
Now those of you who never had the pleasure of dabbling in either one of the above mentioned platforms, they think that credit unions and commercial banks are the same thing. In fact, the reality is quite different as some well-groomed financial experts suggest that credit unions and commercial banks have a huge difference – just like the concept of day and night.
The bottom line is that every person who has an account somewhere in a bank or a credit union needs that money to be safe for an indefinite amount of time. The part where you select a credit union comes to your own personal interests and environmental constraints.
An in depth analysis of credit unions suggests that they were, and still are, designed to serve a very particular group of individuals. People who’re entitled to use credit union accounts are the guys who’re members of these unions – outsiders simply don’t get the same privileges. The plus point of credit unions is that these unions are nonprofit organizations, so whatever the amount of profit is incurred, it goes in your pocket in the end.
According to CBS News experts, dumping a commercial bank may not be a sound decision for you. The steps could utterly fail because credit unions don’t come with a lot of guarantees. So do the commercial banks, but at least, these banks have some rules and regulations, alongside paper based agreements that you can haul to a court, in case something goes wrong.
Another big benefit of dealing with credit union accounts is that most of the American States exempt them from taxes and interests. It’s the “not for profit” tag that usually does the trick for these organization. However, credit unions are mostly meant for small time stock holders who don’t want to take a lot of risks.
The main reason as to why commercial banks aren’t prioritized is because of the following common factors:
• The fee structure is really pinching.
• Hidden charges that spring the bejeesus out of everyone
• Poor customer service
• Lack of knowledge and information circulation
The Future and Present Situation of Credit Unions:
At the moment, credit unions are doing a pretty damn good job. First of all, there’s a lot of room for expansion and security for those individuals who want to play at a small level. Secondly, banks are unpredictable when it comes to lending and interest rates. On the other hand, credit unions are lending because they’re not tangled up in a sub-prime mess.
Now if we compare the interest rates of credit unions with commercial banks, we get the following results.
*These results are just to give you a general overview. The exact percentage and figures might be different as per your State.
- Car Loans:
• Commercial Banks: 6:34%
• Credit Unions: 5:15%
• The Difference Adds up to $170 Approx.
- Mortgage Rate For 1 Year:
• Commercial Banks: 4.73%
• Credit Unions: 4.32%
• The Difference is an extra $440
For rest of the percentages, you can consult different credit unions and banks in your local vicinity. You can even compare online banks with credit unions that reside in your community, just to take a whiff of the difference between two platforms in terms of financial standings.
What’s The Bottom Line Here?
Commercial banks and credit unions have their separate benefits. For example, if you have accounts in a commercial bank, it means that most of the time you’re eligible for profits that go straight into your pocket – granted that you were the investor, and the account was a savings account.
In the same context, the profit is converted back into a better interest rate percentage, when dealing with credit unions. It means that the next time you’ll be making car loan, mortgage or life insurance payments, the interest rate on them, will be quite lower than the previous payment cycle.
By the way, regardless of credit unions and commercial banking platform, there’re some fees that are simply unavoidable. Take the example of overdraft fee, as it has been going on since 2008. Both credit unions and commercial banks have collected over $20 Billion as an overdraft fee, which is mandatory in all kinds of cases.